UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 15712 / April 20, 1998
SEC v. Ted E. Mong, Liberty Bell Association, Inc., and McKenzie
Matthew, Inc., U.S.D.C. S.D. Ohio, No. C2-96-989, filed September
30, 1996.
The Commission announced that the Honorable James Graham of the
United States District Court for the Southern District of Ohio
entered an Order of Permanent Injunction and Other Equitable
Relief (Order) By Default against Liberty Bell Association, Inc.
(Liberty Bell) and McKenzie Matthew, Inc. (McKenzie), for their
misrepresentations and omissions in connection with the offer and
sale of promissory notes to approximately 45 individual
investors. Liberty Bell and McKenzie, two Ohio corporations
based in Newark, Ohio, raised more than $1.6 million by selling
promissory notes to investors from approximately March 1993 until
August 1995.
In its Complaint, the Commission alleged that Liberty Bell and
McKenzie, through Defendant Ted E. Mong (Mong), their President,
and others, misrepresented the risk of investing in the
promissory notes, the return investors would receive and the use
of investor proceeds. In particular, the Commission alleged that
individuals who purchased promissory notes from Liberty Bell and
McKenzie were told that investor funds would be loaned to
successful companies, that investors could earn up to a 230%
return on their investment and that their funds were completely
secured by U.S. Government bonds, government securities and real
estate equity. Instead, the Commission alleged that Liberty Bell
and McKenzie directed investor funds to two struggling companies
that used investor funds for operating capital, while the
promised collateral for investor funds did not exist. Most of
the investors who bought promissory notes from Liberty Bell and
McKenzie lost nearly their entire investment. The Court deemed
the Commission's allegations to be true. Based on these
allegations, the Commission charged Defendants Liberty Bell and
McKenzie with violations of Section 17(a) of the Securities Act
and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
The Order permanently enjoins Liberty Bell and McKenzie from
further fraudulent conduct in violation of the antifraud
provisions of the federal securities laws. The Order requires
Liberty Bell to disgorge its ill-gotten gains of $1,251,600.36
and to pay $329,711.96 in prejudgment interest on that amount.
The Order further requires McKenzie to disgorge its ill-gotten
gains of $223,698.59 and to pay $88,058.73 in prejudgment
interest on that amount. The Court also found in the Order that
civil penalties were appropriate against Liberty Bell and
McKenzie but reserved determination of the amount of any such
penalties for a future date. The action against Mong is still
pending.